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Les interactions fiscales verticales à la lumière de la théorie des multiprincipaux

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  • Florence Lachet-Touya

Abstract

The very essence of both federal and unitary countries is multi-tiered governments. This architecture typically involves some commonality of tax bases between higher- and lower-level authorities. This process points to the existence of vertical externalities, i.e. of an inefficiently high degree of taxation. The central purpose of this paper is to explore the distribution of taxing powers among tiers of governments, and to analyze the nature and the consequences of the vertical externality that arises when different levels of government share joint property tax bases. To that end, the multi-principal theory is highly relevant since the different layers of government can be regarded as competing power centres. We provide a simple taxation model and consider a structure of overlapping governments that co-occupy a same tax base. We show that an independent behaviour of both levels of government results in the cumulated tax rate being too high with respect to a cooperative solution. Actually, when she independently makes her choice and unilaterally raises her tax rate, each level of government ignores the losses of fiscal receipts that other levels will suffer from the induced contraction of the shared tax base. Hence she under-valuates the social marginal cost of raising tax revenue from the common tax base. However, information asymmetry tends to lower the global level of taxation as some rents have to be given up to firms in order to make them reveal their private feature. JEL classification: D72, D82, H23, H30, H32, H71, H77

Suggested Citation

  • Florence Lachet-Touya, 2012. "Les interactions fiscales verticales à la lumière de la théorie des multiprincipaux," Recherches économiques de Louvain, De Boeck Université, vol. 78(1), pages 27-46.
  • Handle: RePEc:cai:reldbu:rel_781_0027
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Florence TOUYA, 2019. "Relationships and Nature of Contracts in the Distribution Structure for Responsible Trade," Working Papers 2018-2019_10, CATT - UPPA - Université de Pau et des Pays de l'Adour, revised Oct 2019.
    2. Florence Lachet-Touya, 2019. "Relationships and nature of contracts in the distribution structure for responsible trade," Working Papers hal-02937865, HAL.
    3. Florence Lachet-Touya, 2016. "EU tax competition and tax avoidance: A multiprincipal perspective," Working Papers hal-02939340, HAL.
    4. Florence TOUYA, 2016. "EU tax competition and tax avoidance: A multiprincipal perspective," Working Papers 2015-2016_11, CATT - UPPA - Université de Pau et des Pays de l'Adour, revised Aug 2016.
    5. Florence TOUYA, 2019. "Relevance of Potential Supply Structures in Frameworks involving Consumer's private Information: the Case of Fair Trade," Working Papers 2018-2019_12, CATT - UPPA - Université de Pau et des Pays de l'Adour, revised Aug 2019.
    6. Florence Lachet-Touya, 2016. "Horizontal and Vertical Tax Interactions in a Common Agency Game," Working Papers hal-02939399, HAL.
    7. Florence TOUYA, 2016. "Horizontal and Vertical Tax Interactions in a Common Agency Game," Working Papers 2015-2016_12, CATT - UPPA - Université de Pau et des Pays de l'Adour, revised Aug 2016.
    8. Florence Lachet-Touya, 2019. "Relevance of potential supply structures in frameworks involving consumer's private information: the case of fair trade," Working Papers hal-02937902, HAL.

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    More about this item

    Keywords

    tax competition; vertical externalities; informational asymmetry; multi-principals;
    All these keywords.

    JEL classification:

    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • H30 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - General
    • H32 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Firm
    • H71 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Taxation, Subsidies, and Revenue
    • H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism

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